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Dogpile

ES Trading for 10/1 thru 10/5 2007

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This thread is to discuss market structure and trading for the week of Oct 1 - Oct 5, 2007.

 

Friday potentially started a 'down auction' with a morning high put in after a reversal day on 9/25 began an 'up auction'. That said, Fridays volume distribution shows buyers interested in the 1537.00 to 1540.00 zone. It was last day of the 3rd quarter so this makes the read on this a little difficult.

 

Thus, we have a selling tail above 41.00 and then a 'symmetrical distribution' after the morning move down. We closed in a 'balanced' state.

 

We have a case of sector rotation where nasdaq stocks have been marching up while other sectors chopped around last week (XLF/XLE).

 

Investors Business Daily tracks 'distriubtion days' -- defined as days where the nasdaq drops -0.8% or more. Note how common these days are on the volatile nasdaq index. We have now gone 9 days without a distribution day and are due for one this week.

5aa70e0b02b5f_Sep28TaylorChartandBalancingLevels.thumb.png.983b02b247eaafe42f60f7de4b013c0c.png

5aa70e0b070b2_Sep28FinalVolumeDistribution.png.1df0092546931525d1b00c8e246025c8.png

5aa70e0b0d5bc_Sep28ChartofQQQQdistributiondays.thumb.png.139d129c3ad7561d033daa2dfefc44d0.png

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Overlapping/lower value for Friday and the peak volume price was below the value area for thursdays trading. Volume also increased with a fair amount of volume happening to the downside. Just hoping this week isn't sleep just waiting for the jobs number Friday.

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powerfull open.

i think i'm done reading/watching anything that would give me a directional bias. i had been looking for the breakout to go long above 1545 since thursday, then watched that MP/COT video in the DOM thread this morning and it biased me i should be looking to short at that area. enough of that, that was just stupid. be interesting to see if we start a new balance area here and previous resistance becomes support.

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I am always uncomfortable buying at high levels after a big rush up. Always have been and have missed moves because of it. The way I see it, after a big rush up, there's not always enough juice to push it higher for the amount I'd want to take out of it. The bullish thing is that it's consolidating at the highs, so just correcting by time instead of price. I wouldn't be suprised if price broke out to the upside for some more gains, but I'd be long, cautiously.

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this is a bullish day but short-term location is tough.

 

significant volume has occured at 1548.25-50... implying some patient, responsive sellers at/above this level. tough to expect MORE momentum away from this level -- but that doesn't make it a good short given the theme for the day.

 

As I write this, market has built now 56k contracts at 48.25... This is often a significant-enough amount to mark a peak for the day...

 

Someday, the 15-min chart will correct and offer a buy zone.

5aa70e0b46397_Oct11109amESTProfile.thumb.png.c146a3faa8ec73ee38f9d7f66667e3d9.png

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sweet chart dogpile. actually i can't rememer now if Jerry stays out of trades when price is that close to the PVP but there is good skew but that doesn't seem to be working.

i guess this is pretty straight up open drive. to advanced location for me.

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skew doesn't really matter when it's a trend day. this is the reason you don't short -- we busted through those 48.25 sellers with new initiative buying.

 

'trend days' are rare and only happen a few times a month. but this is exactly the reason I have begun trading a mechanical daily strategy in another account. Range expansion off of opening price after a short-term downswing is an extremely powerful set-up. trend days are difficult to trade as the strategies appropriate for a trend day (buy and hold) are not good strategies for the other 18-odd trading days of the month...

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Yea, location for me today was realll tough. I ended up grabbing a small short on the NQ cause I wasn't seeing what I wanted on the ES. Trend days are the toughest for me to trade by far, nothin like a nice volume big swing day to make ya feel good.

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volume distribution shows trend day -- but price found some selling at 1558.00 level. there should be some residual upside momentum/buy pressure today. I will be looking long if we should get a good downswing.

 

attached is the final volume distribution for Monday

5aa70e0ba96ec_Oct1FinalDistribution-trenddayquestionable.png.40ae8c66756e30f279fa8765a023be55.png

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thinking of doing a late-day short today for an overnight hold

 

we formed a big volume bar at 58.00 yesterday.

we have actually built value (VWAP) below that level today.

we just made a lower high to that level and a lower high to the opening price

(opening price is often a magnet such that it could be underlying weakness if don't make it back to that level 1559.25)

VIX is above yesterdays high

NQ is due for a trend day down

NQ could also close with a 'cap' pattern today if it closes < 2135.25

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took a late NQ short --- holding overnight -- hopefully INTC or somebody doesn't do anything positive this afternoon.. with some luck, maybe somebody pre-announces a negative quarter.

 

market looks set-up for a good flush down tomorrow. wanted to be there in case it happens overnight.

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market looks set-up for a good flush down tomorrow. wanted to be there in case it happens overnight.

 

If you might...would you mind going over why you feel it's setup for a good flush down? And, how do you manage your stops with overnight trades? I've never held a futures contract over night and have no clue how to deal with stops in that situation. I assume your stops are wider than normal for an overnight play?

 

Thanks Dogpile, I appreciate it!

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yes, I hold a smaller position overnight and play for a larger gain.

 

since you have to ride through the european hours, this makes overnight trades tough as most of the time you will see 2-way action... so I try to be selective on overnight holds. Usually, I am shorting a lower afternoon high or going long a higher afternoon low. I will use a smaller position and my initial stop will be near the swing high/low. If the market moves in your favor in the hours after the close but before european hours, I will move my stop to breakeven -- or take a partial profit and set my stop for remaining such that I have a free-ride.

 

Factor1 why a flush down:

 

Nasdaq is generally a difficult market to 'hold' -- because it has so many shakeout days. What I use to think about this is: any time the days low is less than the previous days close by -0.8%, that is a 'distribution day attempt'. It doesn't have to close that low, just has to go there intraday to shakeout some of the longs. Note the attached chart shows how frequent these are. We have now gone 11 days without such a day.

 

Factor2 why a flush down tomorrow is a decent bet:

 

Yesterday we had a psuedo trend-day up. It ran into a wall at 1558.00 where a lot of volume traded. Today, we built value below 1558.00 and made a lower high in the afternoon (afternoon lower high failed right at 1558.00).

 

thus, I feel we are due for a down day and the market profile seems to confirm that.

 

I could be wrong but I feel it is worth a shot. If we do gap down -- the reward could be large if we do a distribution day.

 

On the other hand, I could be right and still stop out due to overnight noise. Such is life.

 

Also, the market could gap up and then do a distribution day down -- that would mean I stop out but I can then trade that pattern tomorrow live.

 

Thus, the overnight play is kind of a hedge. Very often my thinking going into the next day plays out in the overnight market with a gap and I am then screwed as I didn't catch the move. I use a smaller position so that if I stop out, its not that big of a deal. And ideally, you can take your stop to breakeven and get a free ride on the potential for the move down.

 

I shorted NQ near 36.25. My stop is 38.25 now - the afternoon high. 2 pts maximium risk for potentially 10+ pts down. If the market can trade down before Europe opens, I will take stop to breakeven --- if that stop gets hit and we gap down anyway -- well, then I am sh_t out of luck.

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the blind squirrel stumbled on to a nut last night, thanks TinGull.

 

so I rolled out of bed at 4:30am California time. I come down to my computer and see no positions on the top of my screen ('position graph bar' on Tradestation). great, I stopped-out... nope, turns out the computer needed a re-fresh. I stick a limit order in to cover and it fills like 1 minute later. I had no coffee in me yet and was still sleepy. Pure luck - check out the luck of the timing of when I woke up.

5aa70e0bd6733_Oct3NQCover.png.8f0f6db6355044609ae9af8cab24ae7e.png

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